What are Boards for?

What are Boards for?

by Bill Pardee

I was elected to the Co-op Board for my first time in March of 2010. In spite of experience on another Board of Directors, and a lot of previous study, I had a lot to learn. In particular, I still seek to understand the best balance of responsibility between the Board (a sort-of legislative branch) and the General Manager, the designated executive.

A Board of Directors can be too passive. The corporate world provides the most vivid examples. Both the Enron Board and the Lehman Brothers Board (as well as several other prominent corporate Boards) sat back and even cheered as their Chief Executives took reckless risks that destroyed their respective companies and with it, all stockholder value. Even though we differ in some ways, major and minor, from corporations, clearly our Board must ensure the long-term health of the Co-op, in part by holding the General Manager accountable.

The Co-op holds the General Manager accountable in multiple ways, more ways in 2010 than at any previous time in its history. First, it requires the GM to submit detailed written reports to show compliance or acknowledging failure to comply with the Co-op’s written policies, the Board’s legislation. Those reports must be supported by data and sometimes, as appropriate, by letters from the Human Resources Director or the Financial Manager. Second, the Board in 2010 had external legal and HR audits of the revised Human Resource Policies, which include strengthened employee grievance procedures. Third, the Board paid for an external expert survey of employee concerns and opinions. Fourth, the Co-op hired in January, 2011, an outside audit firm for its second-ever external review of finances. I believe that our Board receives more detailed information than most Corporate Boards, certainly more than in my previous experience as a Board member for a larger organization and as a consultant to a few corporations.

A Board can also cause great damage by being too aggressive. That seldom happens in large public corporations, because those institutions are manifestly too compli­cated to be run on a part-time basis. It does happen in small institutions, especially co-operatives, with their strong tradition of member control. Most stockholders of large corporations know they have no control, perhaps unfortunately.

How could a Board possibly be too involved? First of all, running a co-operative of this size is a complicated business, with dozens of decisions every day that influence each other. For example, a marketing event costs staff time, supplies, food, and advertising as well as other expenses. Will it increase revenue sufficiently to be worthwhile? Adding a new product consumes valuable shelf space and manager time. Will it be the best use of those resources?

The Board doesn’t have the time or resources or, usually, the skills to make such decisions. Most of the directors are not expert in running a grocery store; none of them is paid and, therefore, cannot spend 40 or 50 hours per week on Co-op business. The General Manager, and only the General Manager, is responsible and accountable for the Co-op’s business success. If he or she is responsible and accountable, he or she must have the authority to act, and often to act promptly.

In a topic painful to some of us, that GM authority includes the authority to hire and fire. If the Board intervenes in those decisions, it sends a message that the GM has no real authority over personnel, which leads to rapid dysfunction. The Board does have a responsibility to ensure fair treatment of employees, which it does through the personnel policies, audits, and surveys as well as through the GM’s data-supported reports on staff treatment.

More subtly, direct Board requirements on the General Manager require time to fulfill. Some of that is essential to meeting our Board responsibilities, and that level is a substantial part of the GM’s job. That effort, though necessary, takes the GM away from running the store and building community relations to further the Ends of the Co-op. It’s always a judgment call to decide how much of our requirements on the GM’s time is essential.

In short, the Oneota Community Co-op Board of Directors defines policies that define the ends and the boundaries. Throughout the year, the Board monitors the General Manager’s performance on those policies with multiple sources of information. Discovery of non-compliance calls for remediation, which the Board also monitors. The Board explicitly evaluates the GM through the summary of all these reports.

The Board studies best practices elsewhere and the evolution of the business envi­ron­ment. This is often time consuming, usually un-dramatic, work to ensure the long-term success of the Co-op while the General Manager does the many chal­len­ging tasks to accomplish the Oneota Community Co-op’s Ends within the policy constraints.

I consider it a privilege to contribute to an organization that, in my opinion, contributes so much value to our community through local food, organic food, wellness products, and a warm, friendly store environment. I am delighted to continue learning and exploring ways to strengthen that contribution for the future.